ARENH tariff will not to change until after Q1 ‘14: French ministry

23 October 2013 21:11 Source:ICIS

The French ARENH tariff at which electricity incumbent EDF is obliged to make a quarter of its nuclear generation capacity available to competing suppliers will only be changed after the publication of a decree determining its method of calculation.

Publication of the methodology decree will happen before the end of March next year.

French energy regulator CRE was previously expected to reassess and possibly change the tariff before the end of this year.

Analysts said the methodology chosen will determine whether EDF’s nuclear plant life extensions, which some market participants expect to be granted, will allow the ARENH tariff to be lower.

With longer plant life-spans, amortisation costs will be spread out over more years and will be lower, which would mean EDF could afford to receive a lower ARENH tariff, analysts have argued.

Although the country’s nuclear watchdog ASN will only decide on granting plant life-span extensions in 2015, sources have indicated that market confidence they will be granted could influence the decision on the new ARENH level( see EDEM 18 
October 2013 ).

If EDF’s economic costs are chosen as the basis for the methodology for calculating the tariff, power plant life-spans change nothing, said an analyst. If accounting costs are used, plant life-span extensions will be relevant, he added.

The ARENH tariff has been at €42/MWh since early 2012. Traders said a lower ARENH would be a negative signal for the market.

The ARENH tariff acts as both a support and a cap on traded power prices. If prices fall below ARENH, demand increases as previous ARENH buyers flock to the market, pushing wholesale prices upwards to the ARENH level.

If market prices rise far above the tariff, the lower ARENH charge takes liquidity away from the market, lowering demand. Beatrice Mavroleon

By Beatrice Mavroleon